Mexican Official Says U.S. Oil Swap Proposal Progressing

Mexico is making progress in its efforts to become the second country approved to accept U.S. oil exports.

Petroleos Mexicanos, Mexico’s state-owned oil company, is still waiting a ruling from the U.S. Commerce Department on its January application to be able to get up to 100,000 barrels of light U.S. oil a day in exchange for heavy Mexican oil, Lourdes Melgar, Mexico’s deputy energy secretary for hydrocarbons, says in interview in Washington.

“From the information that I have, everything has been moving smoothly,” Melgar said. “We have gotten support from the U.S. government, and it’s moving fine.”

The U.S. oil would be used at Pemex refineries in Salamanca, Tula and Salina Cruz, that have a combined capacity of 825,000 barrels a day, according to data compiled by Bloomberg. After decades of relying on domestic production, Mexico’s government approved energy reforms last year that allowed its refiners to import oil.

Mexico’s national power company CFE wants to shift power generation feedstock away from fuel oil and toward natural gas, Melgar said. Lighter crude produces less fuel oil than the heavy crude Mexico produces, so the imports are needed for a more balanced refining slate, she said.

U.S. crude production has increased by 72 percent in the past five years, leading companies like ConocoPhillips and Exxon Mobil Corp. to call for the U.S. to end its 40-year-old ban on most unrefined crude exports. Shipments to Canada are allowed, and the U.S. exported a record 502,000 barrels a day in November.

Pemex is negotiating with producers in the Eagle Ford and Permian regions in Texas and the Bakken region in North Dakota, Jose Manuel Carrera, chief executive officer of PMI, the firm’s commercial arm, said March 30. It would import the U.S. crude at the Pajaritos and Dos Bocas terminals.

Mexico also has a shortage of storage capacity, and will issue a policy for developing new tankage, Melgar said.

“It’s a great opportunity for investment in Mexico right now,” she said.

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